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Trade war

China slashes auto tariffs to 15% in a nod to Trump

Move comes after trade talks and stands to benefit all carmakers

China's tariff cuts will benefit luxury brands such as BMW and Mercedes-Benz that rely on imports to supply the world's top auto market.   © Reuters

BEIJING -- China says it will cut tariffs on passenger cars to 15% from 25%, moving to ease trade tensions with a U.S. government eager to reduce its trade deficit with the Asian economic powerhouse.

The new tariff schedule, announced Tuesday, will take effect July 1. A duty on trucks and other autos will also fall to 15% from 20%, while parts will face a uniform 6% tariff, down from current rates between 8% and 25%.

Beijing presented the shift as part of plans to boost imports announced by President Xi Jinping in April. The specific step came following last week's intense trade talks between Beijing and Washington. 

Lower Chinese import tariffs will be a boon to all automakers that export to China. Overall new-automobile sales in China, the world's largest market, grew 3% to 28.87 million vehicles in 2017. Imports surged 17% to 1.21 million, equivalent to a quarter of the Japanese market.

These imports are weighted toward the high end, as many mid- and mass-market automobiles are manufactured in China at plants run by joint ventures. Germany's BMW topped the list of imported brands, with 187,000 units in 2017. Daimler's Mercedes-Benz came in second at 183,000.

While Toyota Motor builds many vehicles in China, it imported roughly 140,000 from Japan in 2017, accounting for over a tenth of the vehicles it sold here. The luxury Lexus brand accounted for around 130,000 of these. The high-end Toyota Alphard minivan and the Hiace commercial van made up much of the rest. The automaker plans to cut prices to reflect lower costs related to the new tariffs.

Nissan Motor exported around 23,000 vehicles to China last fiscal year from factories in Japan, the U.S. and the U.K., most of them part of the Infiniti luxury brand. Subaru imports all the vehicles it sells in the Chinese market from Japan. In fiscal 2017, that was 27,000 units, many of them XV or Forester sport utility vehicles.

"The tariff cuts will provide a boost in the short term," said Kazuhiro Kobayashi, Toyota's CEO for the China region. But in the longer term, "the price gap between Chinese-made Toyotas and imports will narrow," he predicted.

"We will need to tighten communication with our joint-venture partners to make our Chinese-made vehicles more competitive," Kobayashi said.

In the meantime, the two countries reportedly agreed on the outline of a deal to ease punitive sanctions on ZTE, The Wall Street Journal reports. In exchange, the Chinese company has agreed to a management shake-up and is preparing to resume production, according to Chinese media.

ZTE has been on the brink of collapse since mid-April, when Washington imposed a ban on American technology exports to the company for seven years.

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